Certified Government Financial Manager (CGFM) Practice Exam 2025 - Free CGFM Practice Questions and Study Guide

Question: 1 / 875

What is the primary purpose of a cash flow budget?

To minimize costs

To predict future revenues

To manage short-term financial health

The primary purpose of a cash flow budget is to manage short-term financial health. This type of budget provides an overview of the cash inflows and outflows over a specific period, allowing organizations to track their liquidity and ensure they have sufficient cash to meet their operational needs. By analyzing cash flow, a manager can identify potential shortfalls and take proactive measures to address them, thus ensuring that the organization can continue to operate smoothly without disruptions.

In the context of budgeting, while minimizing costs, predicting future revenues, and allocating funds for investments are important functions, these activities are typically secondary to the immediate goal of ensuring that cash is available to meet operational obligations. A cash flow budget focuses on the timing of cash transactions—when cash will come in and when it must be spent—fostering greater control over financial stability in the short term.

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To allocate funds for investments

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